Impact of Tenure Security and Trust on Land Rental Market Development in Rural China

This paper examines the impact of actual and perceived land tenure security and trust on the leasing of land, using detailed household-level data collected in two different regions in China. Wirth regard to actual tenure security, we find that possession of land certificates increases the probability that a household rents in additional land, the size of the leased land, and the probability of using formal contracts; absence of land reallocations in recent years positively affects the likelihood of using informal contracts. Perceptions of tenure security matter for the land renting decisions of households with high actual tenure security. Higher perceived security positively affects the probability that a household rents in additional land as well as the size of the leased land. As regards trust, we find that higher kinship trust induces households to use informal contracts, while higher trust towards known people induces households to use formal contracts.